Also popular: Is the Shale Bubble already beginning to burst?

by Jeff Sanford04 Sep 2014

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Also popular: Is the Shale Bubble already beginning to burst?

Recently, a number of commentators have begun to question the shale "revolution", have begun to point out that a more accurate phrase might be shale "bubble." Canadian geologist David Hughes has issued a couple of key reports pointing out that the output from unconventional shale oil wells plummet dramatically after the first three years. The rock in shale basins is unpermeable, unporous—which is why they are only being tapped today, now that the conventional, easy-to-access oil regions are in production. Unlike the convention wells of yore, some of which have produced for 30-40 years, the average depletion rate of wells in the Bakken Formation are 69% in the first year and 94% over the first five years. The best locations in the shale regions have been drilled and depleted. It will not be long before the majority of shale gas basins in America begin to decline production. OPEC's World Oil Outlook (WOO) 2013, suggests US tight oil, including natural gas liquids, could reach 4.9 million barrels a day by 2018, before declining in the years after. That is, the shale boom, really a bubble, is already beginning to burst.

This week, popular financial site CBS Market Watch ran a story on coming investment trends in the stock market—0ne of the stories, "The Happy Story of Oil Turns Sad” gets to the point. This morning, Bloomberg notes that legendary oil trader, Andrew John Hall, founder of Astenbeck Capital Management LLC, is now putting his money down on the end of the shale boom. Apparently, he has a big bet that the price of oil going back to $150 in a five years or less. Which would be bad.